PANAMA Trends and Developments Contributed by: Roy C Durling, Arias, Fábrega & Fábrega
The Status of Cobre Panama and Metal Mining Introduction In 2019, the Cobre Panama project, operated by Minera Panama, S.A. (MPSA), a subsidiary of First Quantum Minerals Ltd., of Canada, started mining operations and the export of copper. Between 2019 and 2023, MPSA’s copper exports accounted for 80% of Panama’s total exports. Around 7,000 persons worked directly for MPSA and 40,000 workers indirectly depended on the project. In 2022-2023, the copper production represented 1% of the total world production of copper and 3% of the gross domestic product of Panama. Cobre Panama was one of the largest copper mines in the world. The Republic of Panama and MPSA had entered into a contract in 1996 pursuant to which MPSA was granted a concession for the development of a mining project in the Cerro Petaquilla area. This contract was subsequently enacted into law by the National Assembly in 1997 (Law No 9 of 1997, “Law 9”). In a decision by the Supreme Court of Panama, which became effective in late 2021, Law 9 was declared unconstitutional. To fill the void created by the unconstitutionality of Law 9, in October 2023, a new contract was signed and approved by the National Assembly by means of Law No 406 of 2023 (“Law 406”). Demonstrations against Law 406, metal mining in general, and the government rocked Panama in the months of October and November 2023. On 28 November 2023, the Supreme Court of Panama held Law 406 to be unconstitutional. Since then, operations at Cobre Panama have ceased. To further appease protesters, the National Assembly also enacted Law No 407 of 2023 (“Law 407”), which prohibited the granting,
renewing, or extending of concessions for the exploration, extraction, or exploitation of metal mining. Law 9: the first Cobre Panama concession In 1996, the government of Panama, repre - sented by the Ministry of Commerce and Indus - tries, and MPSA signed a contract pursuant to which MPSA was granted exclusive rights for the extraction of copper and other minerals in Cerro Petaquilla for an initial period of 20 years (subject to two 20-year extensions). The conces - sion was approved by the National Assembly of Panama by means of Law No 9 of 1997. Law 9 was a special type of contract known in Panama as a contract-law. Contract-laws are special agreements designed to grant protection to private investors in the case of projects that require substantial investment, such as ports, oil refineries, and pipelines. Contract-laws provide (i) juridical stability and certainty for the dura - tion of the contract to private investors, and (ii) special benefits (usually, but not exclusively, tax benefits), which are not otherwise available pur - suant to the general law. In essence, a contract-law is a law that approves a contract entered into by the nation and pri - vate investors. The contract is signed by a gov - ernment representative, duly authorised by the executive branch (the President and all cabinet ministers), and the private company. The con - tract is subsequently countersigned by the Comptroller General of the Republic. The same terms of the contract stipulate that it will be pre - sented to the National Assembly for approval. The National Assembly may simply approve or reject the contract. Upon its approval, the terms of the contract are embodied in a law (hence the name contract-law). The law is signed by the President and Secretary of the National Assem -
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